Foreign What's up guys! and welcome back to Wall Street Millennial On this channel, we cover everything related to stocks and investing. An estimated 1 million people have lost money as a result of the FTX collapse with thousands of them having lost their entire life savings. The FTX fraud is perhaps the largest and most destructive we've seen since Bernie Madoff's Ponzi scheme in 2008. When Bernie Madoff's fraud was exposed, he knew it was over.

He pled guilty and was sentenced to 150 years in prison and he died Behind Bars 12 years later. Despite Fdx's fraud being of a similar scale to Madoffs, Sam Bankman Freed is still a free man living in luxury accommodation in the Bahamas In recent days, he has given a number of interviews where he tries to blame everyone but himself for the 8 billion fraud and a desperate attempt to avoid taking any responsibility. The most significant media appearance he has made today was an hour-long interview that he gave at the New York Times Deal book. Summit The full interview is linked in the description below in this video.

We'll parse through some of the most blatant factual inconsistencies from the interview and try to determine how much jail time he is likely to serve. The main issue at FDX is that roughly 8 billion dollars of customer funds was funneled to Spf's hedge fund. Alameda Research: Alameda Research invested in Ftt and other cryptocurrencies, incurring huge lawsuits with FTX customers ultimately holding the bag. There are two big questions to answer regarding Spf's potential criminal liability.

Firstly, how did FTX customer funds end up at Alameda Secondly, what did SPF know and when did he know it? Let's listen to his explanation. Is it possible that Alameda had this loan of such a large size? So there is that piece from the terms of service. Um, but there were a number of other parts of the term. deserves a number of other parts of the platform.

On top of that, there is the borrow lending facility where users were lending billions of dollars of assets to each other. Um, you know, collateralized by assets on the exchange? Um, you had uh, and you got obviously Futures contracts for their leveraged positions on. He points to the fact that FTX had a lending feature where customers could choose to lend their money on the platform. Some of these funds ended up being Borrowed by Alameda research on Ftx's website, They say that lenders face no counterparty risk as FTX guarantees even in the event that the borrower is liquidated.

In hindsight, this was probably not the case as FTX had no way to guarantee the 8 billion dollars of losses from Alameda. However, there's an even bigger problem. Even customers who didn't use the Lend feature still ended up holding the bag. This means that Alameda research somehow got its hands on customer deposits that were not supposed to have been lent according to Ftx's own terms of service.

Sam Bickman Freed's explanation to how this happened is so absurd as to be almost comical. when we scroll back to 2018 Uh 2019. I Guess um I've just didn't have bank accounts. They didn't have any bank accounts globally.

we were trying to get them. Um, it took us a while, took us a few years. Um, and you know there are customers who wanted to wire money to FTX and so I think in the meantime, um, some of them were wiring money too I would need a research to get credited on FTX and uh, I think that was a substantial sum and I think that the Ftx's internal accounting did correctly effectively try to debit Alameda for those funds, but it didn't happen in the primary account and so it didn't happen it. You know it created a discrepancy between the display of the account and what was really going on there.

And um, I and I'm still looking into exactly how that how that worked mechanically back in 2019. FTX was not able to open a bank account for whatever reason, but Alameda did have a bank account when FDX customers thought they were depositing funds to FTX they were actually being wired to Alameda research as bank accounts Alameda Research would then give FTX an IOU saying that this money should actually belong to FTX The idea was that once FTX was able to open its own bank account, the customer money could be transferred from Alameda to FTX. Eventually, FTX was able to open its own bank account, but Alameda never transferred the money. They instead used it for their own speculative crypto.

Investments leaving depositors holding the bag if it was done intentionally. What SPF is describing is wire fraud, which is a felony punishable by up to 20 years in prison. So why is SBF willing to admit this? Because he claimed that he had no knowledge of this at the time because he was not operationally involved in Alameda research SBF Founded Alameda Research and to this day still owns the vast majority of it. After he founded FTX, he appointed Caroline Ellison his alleged romantic partner and admitted drug user to be CEO of Alameda.

According to SPF, he had no idea what was going on at Alameda To the extent that Alameda did anything nefarious. it would be Ellison's fault, not his I mean look, I wasn't running I'll meet I I didn't know exactly what was going on I didn't know the size of their position Um, uh, a lot of these are things I've learned over the last month that I learned as I was sort of frantically digging into this on you know, November 6, November 7th, November 8th. Um, uh and and obviously that that's a pretty big mistake on Mark that's a pretty big oversight that I wasn't more aware. um I think I was you know, scared of? um I was nervous because of the conflict of interest about being too involved here.

Sam Bickman Freed says he didn't want to get operationally involved in Alameda because there would be an apparent conflict of interest with him being the CEO of FTX as well as the owner of Alameda Alameda had over 10 billion dollars and was supposed to be very profitable. It's hard to believe that you can own a 10 billion dollar hedge fund and never find the time to figure out what positions it's taking on one person who doesn't buy This explanation is Caroline Ellison According to a Wall Street Journal investigation, Ellison pulled employees in a video meeting in November that she bankman Freed and two other Executives were aware of the decision to move customer funds to Alameda We cannot independently verify the authenticity of Caroline Ellison's statements, but we can verify that SBF is lying. He wants us to believe that he had no idea Alameda had borrowed so much money from FTX depositors. But is this really the case? Um, let's talk about collateral.

Um, because I think this is this entire experience has been in Revelation for a lot of people about uh, what might be collateral um, and clearly you were using uh, ftt, um and Solana and other tokens uh as collateral and part of that required you to mark them in a specific way. a value to them. Um, yep, do you think that you were marking them properly? Ah, in Army's case, I don't think I was marking them uh the way I wish I had From a risk perspective in my head I was looking at a 30 down move over three day period as a sort of like extreme tail case event that you know we had seen once before. um and uh And then you know what happens here was a I mean a 95 down move over the course of a year um and a you know 60 down move over a few day period with very little liquidity and all happening at once in all of these coins in a correlated fashion in which Hedges didn't mean as much.

Also, because this was a specific crash on assets associated with Alameda research rather than all assets Alameda posted Ftt tokens as collateral to secure the loans from FTX depositors. When the fraud was exposed, Ftt crashed and Alameda's collateral became almost worthless. SPF says that he was only expecting a 30 decrease in Ftt price over a few day period as a worst case scenario because the down move was so much worse than expected. This is why FDX went bankrupt.

The fact that he was even doing these calculations means that he knew Alameda was posting huge amounts of Ftt tokens as collateral. In this complete completely contradicts statements I made earlier in this same interview about him not knowing how big Alameda's position was. When you build a mountain of Lies it can become very difficult to keep your story straight and avoid contradicting yourself. And as the interview went on, SPF appeared to become increasingly nervous and had a hard time answering questions.

His nervousness was exposed by his incessant pushing, which got worse as the interview dragged on. It's unclear what SPF hoped to accomplish by doing this interview. His answers were evasive and contradictory. Everything he's said in these public interviews can and will be used against him in court.

That's why his lawyers advised him against making any public statements. At this point, he's probably wishing he had took that advice. All right guys, that wraps it up for this video. What do you think about Sam Binkman freed.

How much jail time, if any, do you expect him to serve? Let us know in the comments section below. As always, thank you so much for watching and we'll see you in the next one. Wall Street Millennial Signing out.